1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Description of the Business

SeaWorld Entertainment, Inc., through its wholly-owned subsidiary, SeaWorld Parks & Entertainment, Inc. (“SEA”) and its subsidiaries (collectively, the “Company”), owns and operates eleven theme parks within the United States. Prior to December 1, 2009, the Company did not have any operations. Prior to its initial public offering on April 24, 2013, the Company was owned by ten limited partnerships (the “Partnerships” or the “selling stockholders”), ultimately owned by affiliates of The Blackstone Group L.P. (“Blackstone”) and certain co-investors.

The Company operates SeaWorld theme parks in Orlando, Florida; San Antonio, Texas; and San Diego, California, and Busch Gardens theme parks in Tampa, Florida, and Williamsburg, Virginia. The Company operates water park attractions in Orlando, Florida (Aquatica); San Diego, California (Aquatica); Tampa, Florida (Adventure Island); and Williamsburg, Virginia (Water Country USA). The Company also operates a reservations-only attraction offering interaction with marine animals (Discovery Cove) and a seasonal park in Langhorne, Pennsylvania (Sesame Place).

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2013 included in the Company’s Annual Report on Form 10-K filed with the SEC as well as the information contained under the heading “Revision of Previously Issued Financial Statements” which follows. The unaudited condensed consolidated balance sheet as of December 31, 2013 has been derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K except as discussed under the heading “Revision of Previously Issued Financial Statements” which follows.

In the opinion of management, such unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations for the year ending December 31, 2014 or any future period due to the seasonal nature of the Company’s operations. Based upon historical results, the Company typically generates its highest revenues in the second and third quarters of each year and incurs a net loss in the first and fourth quarters, in part because six of its theme parks are only open for a portion of the year.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including SEA. All intercompany accounts have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions include, but are not limited to, the accounting for self-insurance, deferred tax assets, deferred revenue, equity compensation and the valuation of goodwill and other indefinite-lived intangible assets. Actual results could differ from those estimates.

Segment Reporting

The Company maintains discrete financial information for each of its eleven theme parks, which is used by the Chief Operating Decision Maker (“CODM”), identified as the Chief Executive Officer, as a basis for allocating resources. Each theme park has been identified as an operating segment and meets the criteria for aggregation due to similar economic characteristics. In addition, all of the theme parks provide similar products and services and share similar processes for delivering services. The theme parks have a high degree of similarity in the workforces and target similar consumer groups. Accordingly, based on these economic and operational similarities and the way the CODM monitors the operations, the Company has concluded that its operating segments may be aggregated and that it has one reportable segment.

Revision of Previously Issued Financial Statements

In the third quarter of 2014, the Company conducted an internal review of its application of the guidance in Accounting Standards Codification (“ASC”) 470-50, Debt-Modifications and Extinguishments, to its accounting for certain debt transactions in 2013, 2012 and 2011. As a result of this review and analysis, the Company determined that it had incorrectly applied the accounting guidance in ASC 470-50 and inappropriately accounted for certain fees as a result of modifications and prepayments in certain years. In accordance with ASC 250 (SEC Staff Accounting Bulletin 99,Assessing Materiality), the Company concluded that the correction of the errors was not material to any of its previously issued annual or interim financial statements. The Company has revised its previously issued financial statements contained in this Quarterly Report on Form 10-Q to correct the effect of these immaterial errors for the corresponding periods.

The following table presents the impact of these corrections on affected unaudited condensed consolidated statements of comprehensive income line items for the three and nine months ended September 30, 2013:


	For the Three Months Ended September 30, 2013							For the Nine Months Ended September 30, 2013
	As Previously Reported		Adjustments			As Revised		As Previously Reported		Adjustments			As Revised
Selected Statements of Comprehensive Income Data:
Operating expenses	$	202,625	$	—		$	202,625	$	570,559	$	3,333		$	573,892

Interest expense	$	21,018	$	(807	)	$	20,211	$	72,550	$	(2,111	)	$	70,439

Loss on early extinguishment of debt and write-off of discounts and deferred financing costs	$	—	$	—		$	—	$	32,429	$	(2,571	)	$	29,858

Income before income taxes	$	184,589	$	807		$	185,396	$	95,915	$	1,349		$	97,264

Provision for income taxes	$	64,390	$	266		$	64,656	$	31,930	$	445		$	32,375

Net income	$	120,199	$	541		$	120,740	$	63,985	$	904		$	64,889

Earnings per share:
Net income per share, basic	$	1.34	$	0.01		$	1.35	$	0.74	$	0.01		$	0.75
Net income per share, diluted	$	1.33	$	0.01		$	1.34	$	0.73	$	0.01		$	0.74

The following table presents the impact of these corrections on affected unaudited condensed consolidated statement of cash flows line items for the nine months ended September 30, 2013:


	For the Nine Months Ended September 30, 2013
	As Previously Reported		Adjustments			As Revised
Selected Statements of Cash Flows Data:
Net cash provided by operating activities	$	276,317	$	(3,333	)	$	272,984

Net cash provided by financing activities	$	14,327	$	3,333		$	17,660

The following table presents the impact of these corrections on affected unaudited condensed consolidated balance sheet line items as of December 31, 2013:


	As of December 31, 2013
	As Previously Reported		Adjustments			As Revised
Selected Balance Sheet Data:
Other assets	$	40,753	$	(4,863	)	$	35,890

Total assets	$	2,582,273	$	(4,863	)	$	2,577,410

Long-term debt	$	1,627,183	$	5,348		$	1,632,531

Deferred tax liabilities, net	$	29,776	$	(4,106	)	$	25,670

Retained earnings	$	7,991	$	(6,105	)	$	1,886

Total stockholders’ equity	$	654,132	$	(6,105	)	$	648,027

Total liabilities and stockholders’ equity	$	2,582,273	$	(4,863	)	$	2,577,410

The following tables present the impact of these corrections for other previously issued periods as indicated:


	For the Year Ended December 31, 2013									For the Year Ended December 31, 2012									For the Year Ended December 31, 2011
	As Previously Reported			Adjustments			As Revised			As Previously Reported			Adjustments			As Revised			As Previously Reported			Adjustments			As Revised
Selected Statements of Comprehensive Income Data:
Operating expenses	$	739,989		$	3,333		$	743,322		$	726,509		$	4,073		$	730,582		$	687,999		$	4,326		$	692,325

Interest expense	$	93,536		$	(2,914	)	$	90,622		$	111,426		$	(861	)	$	110,565		$	110,097		$	(12,356	)	$	97,741

Loss on early extinguishment of debt and write-off of discounts and deferred financing costs	$	32,429		$	(2,571	)	$	29,858		$	—		$	2,053		$	2,053		$	—		$	15,129		$	15,129

Income before income taxes	$	75,482		$	2,152		$	77,634		$	116,926		$	(5,265	)	$	111,661		$	32,541		$	(7,099	)	$	25,442

Provision for income taxes	$	25,004		$	710		$	25,714		$	39,482		$	(2,042	)	$	37,440		$	13,428		$	(2,775	)	$	10,653

Net income	$	50,478		$	1,442		$	51,920		$	77,444		$	(3,223	)	$	74,221		$	19,113		$	(4,324	)	$	14,789

Earnings per share:
Net income per share, basic	$	0.58		$	0.01		$	0.59		$	0.94		$	(0.04	)	$	0.90		$	0.23		$	(0.05	)	$	0.18
Net income per share, diluted	$	0.57		$	0.02		$	0.59		$	0.93		$	(0.04	)	$	0.89		$	0.23		$	(0.05	)	$	0.18
Selected Statements of Cash Flows Data:
Net cash provided by operating activities	$	289,794		$	(3,333	)	$	286,461		$	303,513		$	(4,073	)	$	299,440		$	268,249		$	(4,326	)	$	263,923

Net cash used in financing activities	$	(52,252	)	$	3,333		$	(48,919	)	$	(120,183	)	$	4,073		$	(116,110	)	$	(99,967	)	$	4,326		$	(95,641	)


	For the Three Months Ended June 30, 2014							For the Three Months Ended June 30, 2013
	As Previously Reported		Adjustments			As Revised		As Previously Reported			Adjustments			As Revised
Selected Statements of Comprehensive Income (Loss) Data:
Operating expenses	$	189,190	$	—		$	189,190	$	194,674		$	3,333		$	198,007

Interest expense	$	20,638	$	(112	)	$	20,526	$	22,926		$	(694	)	$	22,232

Loss on early extinguishment of debt and write-off of discounts and deferred financing costs	$	—	$	—		$	—	$	32,429		$	(2,571	)	$	29,858

Income (loss) before income taxes	$	59,994	$	112		$	60,106	$	(24,268	)	$	(68	)	$	(24,336	)

Provision for (benefit from) income taxes	$	22,658	$	42		$	22,700	$	(8,414	)	$	(22	)	$	(8,436	)

Net income (loss)	$	37,336	$	70		$	37,406	$	(15,854	)	$	(46	)	$	(15,900	)

Earnings (loss) per share:
Net income (loss) per share, basic	$	0.43	$	—		$	0.43	$	(0.18	)	$	—		$	(0.18	)
Net income (loss) per share, diluted	$	0.43	$	—		$	0.43	$	(0.18	)	$	—		$	(0.18	)


	For the Three Months Ended March 31, 2014									For the Three Months Ended March 31, 2013
	As Previously Reported			Adjustments			As Revised			As Previously Reported			Adjustments			As Revised
Selected Statements of Comprehensive Loss Data:
Interest expense	$	20,046		$	(342	)	$	19,704		$	28,606		$	(610	)	$	27,996

Loss before income taxes	$	(79,471	)	$	342		$	(79,129	)	$	(64,406	)	$	610		$	(63,796	)

Benefit from income taxes	$	(30,040	)	$	128		$	(29,912	)	$	(24,046	)	$	201		$	(23,845	)

Net loss	$	(49,431	)	$	214		$	(49,217	)	$	(40,360	)	$	409		$	(39,951	)

Loss per share:
Net loss per share, basic	$	(0.56	)	$	—		$	(0.56	)	$	(0.49	)	$	0.01		$	(0.48	)
Net loss per share, diluted	$	(0.56	)	$	—		$	(0.56	)	$	(0.49	)	$	0.01		$	(0.48	)